Does college really make you richer? Compared to whom?

Transcript

There's going to college make you more rich. There's a college course called econometrics that answers that exact question. Just a bunch of people testing all those economic ideas that people have had. They have a whole system, and you're looking at it. This is a chart that estimates how much more money you'll make when you have it agree. But it doesn't really look like that. It looks super complicated. So let's break it down. These numbers are made up so we can see how this works. For the right. Every point is a person. Up here is how much they make. Across here is how many years they've worked. The people who went to college make 54,000 a year on average. The people who didn't make 34, 20,000 more. There we go. College didn't. Wait, the college group also has more work experience. Six years on average. The other group has two. So we're comparing different amounts of that as well. That's why we've got this equation. It uses both things, college and experience. To fit these lines to the data. In this model, each extra year of experience goes with $2,000 more pay. Or extra years, $2,000 each. That's $8,000 of $20,000 of the gap. Take that out and we're left with 12,000. Watch. Pick four years of experience for both groups. This line says 50,000. This one says 38. 12,000 apart. That's what the numbers telling us. Now, did college actually cause that 12,000? We still haven't proved that. Maybe one group had better family connections. We dealt with experience. We didn't deal with everything. And that is a big part of econometrics. Figuring out how to test these ideas when people's lives don't line up neatly. It's not necessarily an apples to apples comparison. So when you say college makes you more money, compared to hill.

Transcribed automatically from the video, so small errors are possible.